Reference no: EM13218569
Suppose that college education raises a person's wage by $30,000 per year, from $40,000 to $70,000. Assume that the interest rate is 3 per cent and there is no growth in wages. Suppose you are a high school senior and deciding whether or not to go to college. Find the PDV of earnings in the following cases. Also, assume that the work time is still 45 years, adding up to a 49-year non-college work career.
a) What is the PDV of your labor income if you do not go to college and start working immediately?
b) As an alternative, you could pay $20,000 per year in college tuition, attend college for 4 years, and then earn $70,000 after you graduate. What is the PDV of your net earnings (adjusting for tuition) under this plan?
c) Discuss the economic value of college education.
d) What if you pursue the plan described in (b), but you also expect to be unemployed for 2 years after ?nishing college (knock on wood). During these years assume that you do not have access to any unemployment insurance. What is the PDV of your net earnings under this plan?
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: Suppose that college education raises a person's wage by $30,000 per year, from $40,000 to $70,000. Assume that the interest rate is 3 per cent and there is no growth in wages. Suppose you are a high school senior and deciding whether or not to go..
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